Federalist No. 34

Author: Alexander Hamilton

Date: January 4, 1788

Subject: Concerning the Power of Taxation (Continued from No. 33.)

To the People of the State of New York:

I FLATTER myself it has been clearly shown in my last number
that the particular States, under the proposed Constitution,
would have COEQUAL authority with the Union in the article
of revenue, except as to duties on imports. As this leaves
open to the States far the greatest part of the resources of
the community, there can be no color for the assertion that
they would not possess means as abundant as could be desired
for the supply of their own wants, independent of all external
control. That the field is sufficiently wide will more fully
appear when we come to advert to the inconsiderable share of
the public expenses for which it will fall to the lot of the
State governments to provide.

To argue upon abstract principles that this co-ordinate
authority cannot exist, is to set up supposition and theory against
fact and reality. However proper such reasonings might be to
show that a thing OUGHT NOT TO EXIST, they are wholly to be
rejected when they are made use of to prove that it does not
exist contrary to the evidence of the fact itself. It is well
known that in the Roman republic the legislative authority,
in the last resort, resided for ages in two different political
bodies not as branches of the same legislature, but as distinct
and independent legislatures, in each of which an opposite
interest prevailed: in one the patrician; in the other, the
plebian. Many arguments might have been adduced to prove the
unfitness of two such seemingly contradictory authorities,
each having power to ANNUL or REPEAL the acts of the other. But
a man would have been regarded as frantic who should have attempted
at Rome to disprove their existence. It will be readily understood
that I allude to the COMITIA CENTURIATA and the COMITIA TRIBUTA.
The former, in which the people voted by centuries, was so
arranged as to give a superiority to the patrician interest;
in the latter, in which numbers prevailed, the plebian interest
had an entire predominancy. And yet these two legislatures
coexisted for ages, and the Roman republic attained to the
utmost height of human greatness.

In the case particularly under consideration, there is no such
contradiction as appears in the example cited; there is no
power on either side to annul the acts of the other. And in
practice there is little reason to apprehend any inconvenience;
because, in a short course of time, the wants of the States
will naturally reduce themselves within A VERY NARROW COMPASS;
and in the interim, the United States will, in all probability,
find it convenient to abstain wholly from those objects to
which the particular States would be inclined to resort.

To form a more precise judgment of the true merits of this
question, it will be well to advert to the proportion between
the objects that will require a federal provision in respect
to revenue, and those which will require a State provision.
We shall discover that the former are altogether unlimited,
and that the latter are circumscribed within very moderate
bounds. In pursuing this inquiry, we must bear in mind that
we are not to confine our view to the present period, but to
look forward to remote futurity. Constitutions of civil government
are not to be framed upon a calculation of existing exigencies,
but upon a combination of these with the probable exigencies
of ages, according to the natural and tried course of human
affairs. Nothing, therefore, can be more fallacious than to
infer the extent of any power, proper to be lodged in the national
government, from an estimate of its immediate necessities.
There ought to be a CAPACITY to provide for future contingencies
as they may happen; and as these are illimitable in their nature,
it is impossible safely to limit that capacity. It is true,
perhaps, that a computation might be made with sufficient accuracy
to answer the purpose of the quantity of revenue requisite
to discharge the subsisting engagements of the Union, and to
maintain those establishments which, for some time to come,
would suffice in time of peace. But would it be wise, or would
it not rather be the extreme of folly, to stop at this point,
and to leave the government intrusted with the care of the
national defense in a state of absolute incapacity to provide
for the protection of the community against future invasions
of the public peace, by foreign war or domestic convulsions?
If, on the contrary, we ought to exceed this point, where can
we stop, short of an indefinite power of providing for emergencies
as they may arise? Though it is easy to assert, in general
terms, the possibility of forming a rational judgment of a
due provision against probable dangers, yet we may safely challenge
those who make the assertion to bring forward their data, and
may affirm that they would be found as vague and uncertain
as any that could be produced to establish the probable duration
of the world. Observations confined to the mere prospects of
internal attacks can deserve no weight; though even these will
admit of no satisfactory calculation: but if we mean to be
a commercial people, it must form a part of our policy to be
able one day to defend that commerce. The support of a navy
and of naval wars would involve contingencies that must baffle
all the efforts of political arithmetic. Admitting that we
ought to try the novel and absurd experiment in politics of
tying up the hands of government from offensive war founded
upon reasons of state, yet certainly we ought not to disable
it from guarding the community against the ambition or enmity
of other nations. A cloud has been for some time hanging over
the European world. If it should break forth into a storm,
who can insure us that in its progress a part of its fury would
not be spent upon us? No reasonable man would hastily pronounce
that we are entirely out of its reach. Or if the combustible
materials that now seem to be collecting should be dissipated
without coming to maturity, or if a flame should be kindled
without extending to us, what security can we have that our
tranquillity will long remain undisturbed from some other cause
or from some other quarter? Let us recollect that peace or
war will not always be left to our option; that however moderate
or unambitious we may be, we cannot count upon the moderation,
or hope to extinguish the ambition of others. Who could have
imagined at the conclusion of the last war that France and
Britain, wearied and exhausted as they both were, would so
soon have looked with so hostile an aspect upon each other?
To judge from the history of mankind, we shall be compelled to
conclude that the fiery and destructive passions of war reign
in the human breast with much more powerful sway than the mild
and beneficent sentiments of peace; and that to model our political
systems upon speculations of lasting tranquillity, is to calculate
on the weaker springs of the human character.

What are the chief sources of expense in every government? What
has occasioned that enormous accumulation of debts with which
several of the European nations are oppressed? The answers
plainly is, wars and rebellions; the support of those institutions
which are necessary to guard the body politic against these
two most mortal diseases of society. The expenses arising from
those institutions which are relative to the mere domestic
police of a state, to the support of its legislative, executive,
and judicial departments, with their different appendages,
and to the encouragement of agriculture and manufactures (which
will comprehend almost all the objects of state expenditure),
are insignificant in comparison with those which relate to
the national defense.

In the kingdom of Great Britain, where all the ostentatious
apparatus of monarchy is to be provided for, not above a fifteenth
part of the annual income of the nation is appropriated to
the class of expenses last mentioned; the other fourteen fifteenths
are absorbed in the payment of the interest of debts contracted
for carrying on the wars in which that country has been engaged,
and in the maintenance of fleets and armies. If, on the one
hand, it should be observed that the expenses incurred in the
prosecution of the ambitious enterprises and vainglorious pursuits
of a monarchy are not a proper standard by which to judge of
those which might be necessary in a republic, it ought, on
the other hand, to be remarked that there should be as great
a disproportion between the profusion and extravagance of a
wealthy kingdom in its domestic administration, and the frugality
and economy which in that particular become the modest simplicity
of republican government. If we balance a proper deduction
from one side against that which it is supposed ought to be
made from the other, the proportion may still be considered
as holding good.

But let us advert to the large debt which we have ourselves
contracted in a single war, and let us only calculate on a
common share of the events which disturb the peace of nations,
and we shall instantly perceive, without the aid of any elaborate
illustration, that there must always be an immense disproportion
between the objects of federal and state expenditures. It is
true that several of the States, separately, are encumbered
with considerable debts, which are an excrescence of the late
war. But this cannot happen again, if the proposed system be
adopted; and when these debts are discharged, the only call
for revenue of any consequence, which the State governments
will continue to experience, will be for the mere support of
their respective civil list; to which, if we add all contingencies,
the total amount in every State ought to fall considerably
short of two hundred thousand pounds.

In framing a government for posterity as well as ourselves,
we ought, in those provisions which are designed to be permanent,
to calculate, not on temporary, but on permanent causes of
expense. If this principle be a just one our attention would
be directed to a provision in favor of the State governments
for an annual sum of about two hundred thousand pounds; while
the exigencies of the Union could be susceptible of no limits,
even in imagination. In this view of the subject, by what logic
can it be maintained that the local governments ought to command,
in perpetuity, an EXCLUSIVE source of revenue for any sum beyond
the extent of two hundred thousand pounds? To extend its power
further, in EXCLUSION of the authority of the Union, would
be to take the resources of the community out of those hands
which stood in need of them for the public welfare, in order
to put them into other hands which could have no just or proper
occasion for them.

Suppose, then, the convention had been inclined to proceed
upon the principle of a repartition of the objects of revenue,
between the Union and its members, in PROPORTION to their comparative
necessities; what particular fund could have been selected
for the use of the States, that would not either have been
too much or too little too little for their present, too much
for their future wants? As to the line of separation between
external and internal taxes, this would leave to the States,
at a rough computation, the command of two thirds of the resources
of the community to defray from a tenth to a twentieth part
of its expenses; and to the Union, one third of the resources
of the community, to defray from nine tenths to nineteen twentieths
of its expenses. If we desert this boundary and content ourselves
with leaving to the States an exclusive power of taxing houses
and lands, there would still be a great disproportion between
the MEANS and the END; the possession of one third of the resources
of the community to supply, at most, one tenth of its wants.
If any fund could have been selected and appropriated, equal
to and not greater than the object, it would have been inadequate
to the discharge of the existing debts of the particular States,
and would have left them dependent on the Union for a provision
for this purpose.

The preceding train of observation will justify the position
which has been elsewhere laid down, that ``A CONCURRENT JURISDICTION
in the article of taxation was the only admissible substitute
for an entire subordination, in respect to this branch of power,
of State authority to that of the Union.'' Any separation of
the objects of revenue that could have been fallen upon, would
have amounted to a sacrifice of the great INTERESTS of the
Union to the POWER of the individual States. The convention
thought the concurrent jurisdiction preferable to that subordination;
and it is evident that it has at least the merit of reconciling
an indefinite constitutional power of taxation in the Federal
government with an adequate and independent power in the States
to provide for their own necessities. There remain a few other
lights, in which this important subject of taxation will claim
a further consideration.